Charles Schwab & Co., the leader among brokers catering to self-directed investors, is trying to attract more cautious customers with certificates of deposits linked to the stock market.

This month the San Francisco broker-dealer unveiled its third CD tied to the Standard & Poor's 500 index, along with a certificate of deposit linked to the Chicago Board Options Exchange Internet index.

The CDs offer FDIC insurance up to $100,000 while letting investors participate in stock market gains.

The CDs offer 100% principal protection when held until maturity, which averages five years.

Both products require an initial investment of $10,000 and will be available until Sept. 30.

The CD tied to the S&P 500 is being issued by Chicago-based Bank One Corp., while Charlotte, N.C.-based First Union Corp. is issuing the Internet-linked CD, said Leslie L Durschinger, a vice president in Schwab's structured products division. First Union had also issued Schwab's other two equity-linked CDs.

Equity-linked CDs are not a new product. Banks have offered them since at least the early 1990s. But in recent months, the products have undergone a minor renaissance.

In July, LaSalle Bank, the Chicago subsidiary of ABN Amro of Amsterdam, introduced a callable equity-linked CD tied to the S&P 500.

For its part, Schwab is targeting investors who want to participate in broader market returns -- as well as sectors like Internet stocks -- without taking on a lot of risk, Ms. Durschinger said.

"We've also seen people who have been in equities for some time, but are looking to pare back their weighting,'' she said.

Ms. Durschinger declined to give sales figures from Schwab's previous sales of the products, citing proprietary reasons. However, she said executives are "happy" with sales performance so far and are exploring similar products, including a possible international equity-linked product.

However, observers expressed some reservations about hybrid CDs.

"It's really going after a small stripe of investor," said Dennis Gallant, a consultant with Boston-based Cerulli Associates.

"If someone looks at the return of the Standard & Poor's 500 index and the return on their CD, they're going to be sorely disappointed," Mr. Gallant cautioned.

Once the preserve of private clients, equity-linked CDs allow "mom and pop" investors to participate in the market without losing sleep, said Jim Dillahunty, the president of Fixed Income Securities, a San Diego firm that has helped distribute similar products.

"Your worst scenario is you have a six-years maturity and you get your money back,'' said Mr. Dillahunty.

But unlike regular certificates of deposits, which can be redeemed early at a bank for a penalty, equity-linked CDs involve complicated, underlying equity options strategies that can take time to unwind, he said. "A customer that puts in $25,000 could end up getting out $18,000," he added.

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